ABC News, May 22, 2007. The CIA has received secret presidential approval to mount a covert “black” operation to destabilize the Iranian government, current and former officials in the intelligence community tell the Blotter on ABCNews.com.

The sources, who spoke on the condition of anonymity because of the sensitive nature of the subject, say President Bush has signed a “nonlethal presidential finding” that puts into motion a CIA plan that reportedly includes a coordinated campaign of propaganda, disinformation and manipulation of Iran’s currency and international financial transactions.

“I can’t confirm or deny whether such a program exists or whether the president signed it, but it would be consistent with an overall American approach trying to find ways to put pressure on the regime,” said Bruce Riedel, a recently retired CIA senior official who dealt with Iran and other countries in the region.

A National Security Council spokesperson, Gordon Johndroe, said, “The White House does not comment on intelligence matters.” A CIA spokesperson said, “As a matter of course, we do not comment on allegations of covert activity.”

The sources say the CIA developed the covert plan over the last year and received approval from White House officials and other officials in the intelligence community.

Officials say the covert plan is designed to pressure Iran to stop its nuclear enrichment program and end aid to insurgents in Iraq.

“There are some channels where the United States government may want to do things without its hand showing, and legally, therefore, the administration would, if it’s doing that, need an intelligence finding and would need to tell the Congress,” said ABC News consultant Richard Clarke, a former White House counterterrorism official.

Current and former intelligence officials say the approval of the covert action means the Bush administration, for the time being, has decided not to pursue a military option against Iran.

“Vice President Cheney helped to lead the side favoring a military strike,” said former CIA official Riedel, “but I think they have come to the conclusion that a military strike has more downsides than upsides.”

The covert action plan comes as U.S. officials have confirmed Iran had dramatically increased its ability to produce nuclear weapons material, at a pace that experts said would give them the ability to build a nuclear bomb in two years.

Riedel says economic pressure on Iran may be the most effective tool available to the CIA, particularly in going after secret accounts used to fund the nuclear program.

“The kind of dealings that the Iranian Revolution Guards are going to do, in terms of purchasing nuclear and missile components, are likely to be extremely secret, and you’re going to have to work very, very hard to find them, and that’s exactly the kind of thing the CIA’s nonproliferation center and others would be expert at trying to look into,” Riedel said.

Under the law, the CIA needs an official presidential finding to carry out such covert actions. The CIA is permitted to mount covert “collection” operations without a presidential finding.

“Presidential findings” are kept secret but reported to the Senate Select Committee on Intelligence, the House Permanent Select Committee on Intelligence and other key congressional leaders.

The “nonlethal” aspect of the presidential finding means CIA officers may not use deadly force in carrying out the secret operations against Iran.

Still, some fear that even a nonlethal covert CIA program carries great risks.

“I think everybody in the region knows that there is a proxy war already afoot with the United States supporting anti-Iranian elements in the region as well as opposition groups within Iran,” said Vali Nasr, adjunct senior fellow for Mideast studies at the Council on Foreign Relations.

“And this covert action is now being escalated by the new U.S. directive, and that can very quickly lead to Iranian retaliation and a cycle of escalation can follow,” Nasr said.

Also briefed on the CIA proposal, according to intelligence sources, were National Security Advisor Steve Hadley and Deputy National Security Advisor Elliott Abrams.

“The entire plan has been blessed by Abrams, in particular,” said one intelligence source familiar with the plan. “And Hadley had to put his chop on it.”

Abrams’ last involvement with attempting to destabilize a foreign government led to criminal charges.

He pleaded guilty in October 1991 to two misdemeanor counts of withholding information from Congress about the Reagan administration’s ill-fated efforts to destabilize the Nicaraguan Sandinista government in Central America, known as the Iran-Contra affair. Abrams was later pardoned by President George H. W. Bush in December 1992.

In June 2001, Abrams was named by then National Security Advisor Condoleezza Rice to head the National Security Council’s office for democracy, human rights and international operations. On Feb. 2, 2005, National Security Advisor Hadley appointed Abrams deputy assistant to the president and deputy national security advisor for global democracy strategy, one of the nation’s most senior national security positions.

As earlier reported on the Blotter on ABCNews.com, the United States has supported and encouraged an Iranian militant group, Jundullah, that has conducted deadly raids inside Iran from bases on the rugged Iran-Pakistan-Afghanistan “tri-border region.”

U.S. officials deny any “direct funding” of Jundullah groups but say the leader of Jundullah was in regular contact with U.S. officials.

American intelligence sources say Jundullah has received money and weapons through the Afghanistan and Pakistan military and Pakistan’s intelligence service. Pakistan has officially denied any connection.

A report broadcast on Iranian TV last Sunday said Iranian authorities had captured 10 men crossing the border with $500,000 in cash along with “maps of sensitive areas” and “modern spy equipment.”

A senior Pakistani official told ABCNews.com the 10 men were members of Jundullah.

The leader of the Jundullah group, according to the Pakistani official, has been recruiting and training “hundreds of men” for “unspecified missions” across the border in Iran.

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